FISCAL NOTE
Date Requested: February 12, 2025
Time Requested: 09:53 PM |
| Agency: |
Tax & Revenue Department, WV State |
|---|
| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 1042 |
Introduced |
SB218 |
|
|---|
| CBD Subject: |
Taxation |
|---|
|
FUND(S):
General Revenue Fund
Sources of Revenue:
General Fund
Legislation creates:
Decreases Existing Revenue, Increases Existing Expenses
Fiscal Note Summary
Effect this measure will have on costs and revenues of state government.
The stated purpose of this bill is to create a tax credit related to childcare expenses.
Per our interpretation, the legislation creates a refundable tax credit for childcare expenses for a resident individual who is eligible for the federal Child and Dependent Care Credit claimed on Internal Revenue Service Form 2441 for the same taxable year. The credit is calculated as a percentage of the federal income tax credit with the applicable percentage based on the resident individual’s federal adjusted gross income. The credit is limited to a resident individual with federal adjusted gross income of less than $65,000. The legislation does not address residents who file jointly. The legislation would be effective for taxable years beginning on and after January 1, 2026.
The impact of this bill is calculated in isolation from that of HB 226 which passed during the 2024 2nd Special Legislative Session. According to our interpretation, the legislation, if passed, would result in a decrease in General Revenue collections of roughly $650,000 beginning in FY2027.
Additional administrative costs incurred by the State Tax Department would be $29,150 in FY2026 and $11,000 in subsequent fiscal years.
Fiscal Note Detail
| Effect of Proposal |
Fiscal Year |
2025
Increase/Decrease
(use"-") |
2026
Increase/Decrease
(use"-") |
Fiscal Year
(Upon Full
Implementation) |
| 1. Estmated Total Cost |
0 |
29,150 |
11,000 |
| Personal Services |
0 |
11,000 |
11,000 |
| Current Expenses |
0 |
0 |
0 |
| Repairs and Alterations |
0 |
0 |
0 |
| Assets |
0 |
1,650 |
0 |
| Other |
0 |
16,500 |
0 |
| 2. Estimated Total Revenues |
0 |
0 |
-650,000 |
Explanation of above estimates (including long-range effect):
Per our interpretation, the legislation creates a refundable tax credit for childcare expenses for a resident individual who is eligible for the federal Child and Dependent Care Credit claimed on Internal Revenue Service Form 2441 for the same taxable year. The credit is calculated as a percentage of the federal income tax credit with the applicable percentage based on the resident individual’s federal adjusted gross income. The tax credit is graduated according to the federal adjusted gross income of the taxpayer. Taxpayers with federal adjusted gross income of $45,001 to $65,000 are eligible to claim 20 percent of their federal credit, those with $30,001 to $45,000 are eligible to claim 30 percent of the federal credit received, and those with less than $30,000 are eligible to claim 50 percent of the federal credit received. It is estimated that roughly 4,700 taxpayers would benefit from this credit. The credit is limited to a resident individual with federal adjusted gross income of less than $65,000. The legislation does not address residents who file jointly. The legislation would be effective for taxable years beginning on and after January 1, 2026.
The impact of this bill is calculated in isolation from that of HB 226 which passed during the 2024 2nd Special Legislative Session. According to our interpretation, the legislation, if passed, would result in a decrease in General Revenue collections of roughly $650,000 beginning in FY2027.
Additional administrative costs incurred by the State Tax Department would be $29,150 in FY2026 and $11,000 in subsequent fiscal years.
Memorandum
The stated purpose of this bill is to create a tax credit related to childcare expenses.
The term “federal childcare tax credit” as used herein refers to IRS Form 2441 “Child and Dependent Care Expenses.” However, for purposes of this subsection, to constitute a “qualified individual” and for an individual to obtain any refund, the dependent child claimed must not have reached the age of 13 on December 31 of the tax year. The bill is silent regarding whether only the childcare expenses (and not any expenses incurred with respect to a dependent adult) claimed on IRS Form 2441 are included in the proposed credit. “Resident Individual” is not defined.
Further, HB226 (2nd Special Session 2024) created a “child and dependent care credit.” The tax credit under HB 226 is nonrefundable and based on 50% of the federal credit allowed. The tax credit under HB226 was effective for Personal Income Tax Year 2024.
The tax credit under this bill does not become effective until tax year 2026. However, without any further action, the two similar childcare expense tax credits will be operative starting in Tax Year 2026 with potential conflicts or “double-dipping.” This bill does not attempt to repeal or replace the existing Childcare Tax Credit under W.Va. Code §11-21-26. It creates new W.Va. Code §11-21-27.
Person submitting Fiscal Note: Mark Muchow
Email Address: RADfiscal@wv.gov